Yahoo Finance SEAA-led best practice on co-broking commissions to take effect from July 1
From left: Bernard Tong, CEO of EdgeProp Singapore; Raama Subramaniyan, KEO of SRI; Eugene Lim, KEO of ERA Realty; Justin Quek, CEO of OrangeTee; Derrick Law, agency operations director at PropNex Realty; and Jerome Loh, director and head of operations at Huttons Asia. (Picture: SEAA)
In just over a month, the ambiguity in Singapore relating to property agent commissions, especially co-broking arrangements, will be subject to non-binding best practice guidelines. The aim of the industry-supported guide is to normalise the practice of agents collecting commission from the party they represent.
The guide, an industry first, is titled “Best Practice Guide for Co-Broking Commission” and was drawn up with the support of all the major property agencies which represent over 90% of registered real estate agents in Singapore.
It is an initiative helmed by the Singapore Estate Agents Association (SEAA), the largest representative body in Singapore for real estate salespersons and estate agencies. SEAA worked with 57 estate agencies to sign a memorandum of understanding (MOU) last November that introduced this best practice guide.
The guidelines will come into effect on July 1. Signatories of the MOU have begun educating and disseminating the co-broking best practice to their respective agents.
They were also the keynote topic of SEAA’s conference on May 17, which included a panel discussion comprising key estate agency leaders. The panellists included Justin Quek, CEO of OrangeTee; Eugene Lim, key executive officer (KEO) of ERA Realty; Raama Subramaniyan, KEO of SRI; Derrick Law, agency operations director at PropNex Realty; and Jerome Loh, director and head of operations at Huttons Asia. The panel discussion was moderated by Bernard Tong, CEO of EdgeProp Singapore.
Co-broking agreement to minimise conflict of interest
SEAA president Adam Wang highlights that there is no uniformity in the current practice of how property agents are remunerated. For example, in some transactions, the seller will pay the commission to the agent representing them, while it is up to the discretion of the buyer if they want to pay commission to the agent representing them.
“If the buyer doesn’t pay the commission to their agent, then their agent will negotiate with the seller’s agent to share the commission. This creates a potential conflict of interest as the buyer’s agent can be caught in a dilemma — protecting their client’s interest first, or protecting their commission,” says Wang, adding that the same complexity also applies to rental transactions.
The objective of the best practice guide is to evolve the practice of property agent remuneration in Singapore to align with most major real estate market jurisdictions around the world where real estate representation is very clear. “Agents should collect commission from the party they represent, meaning that the buyer’s agent should collect their commission from the buyer, and the same principle applies to tenancy commission,” says Wang. “This is the arrangement the best practice guide seeks to achieve.”
The real estate agency industry has been pushing for a uniform approach to dealing with co-broking commissions since the establishment of the Council for Estate Agencies (CEA) in 2010, says ERA’s Lim. CEA is a statutory board of the Ministry of National Development that regulates the real estate agency industry in Singapore.
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“When the idea was mooted nearly 15 years ago, the industry was not ready to adopt this practice. But over the past few years, the industry has significantly matured alongside the adoption of new technologies and elevated skillsets among most property agents, and this has increased their overall value proposition,” says Lim.
No more ‘tour guide’ agents
“For many years, the buyer’s agent has been accused of being the ‘tour guide’ agent, providing relatively little value to their services aside from shuffling buyers from one viewing to the next,” he says.
Lim adds that while the demands and expectations of buyers and sellers have risen in recent years, most are willing to pay for the professional services of their agent if they can see value in the services that are being provided to them. This includes familiarity with government policies and processes, market knowledge and advice, as well as professional negotiation skills, he says.
“We should view the introduction of this best practice guide for co-broking commissions as a chance to elevate ourselves and use it to justify why we are worth the commission for our services,” says OrangeTee’s Quek.
“While the prevalence of technology has empowered buyers and sellers, it has also resulted in greater instances of analysis paralysis. This is where we can step in to help them make sense of the market,” says Quek.
Agents should also look forward to the clarity that the best practice guide provides pertaining to commission payments. PropNex’s Law says that a common dispute that estate agencies typically need to mediate are co-broking-related disagreements. But the guide now puts forward the practice that all commission fee arrangements should be agreed upon prior to any engagement with clients.
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However, it is important to note that the best practice guide is not a regulation, and agents will not be penalised for not adhering to it.
“Although this is not the current practice for the entire industry right now, change has to start somewhere, and this is the starting point. We recognise that this will take time, but we hope the industry will see the benefits it brings and work together towards that,” says SEAA’s Wang.
The future of technology and real estate
Tong shares his thoughts on the impact of technology on the real estate sector, and how it may affect the role of property agents in the future. (Picture: SEAA)
Besides discussion on the co-broking guide, the SEAA conference saw EdgeProp Singapore’s Tong share his views on the impact of technology on the real estate sector, and how it may affect the role of property agents in the future.
He outlines four major technology trends that have been influencing the real estate landscape, namely predictive analytics, virtual staging, blockchain technology and artificial intelligence.
EdgeProp has incorporated these tools into its suite of property analytics products and services, says Tong, citing the company’s new AI product called EP Buddy, which provides personalised property data. “EP Buddy can provide information about profitable transactions for a specific development, its valuations and its transaction trends,” he says.
Tong observes that as technology and analytics tools encroach on the traditional role of salespersons, it is more urgent for realtors to adapt to stay relevant. However, he opines that agents cannot be completely displaced by technology, since it cannot replace personal touch and the relationship between agent and client.
“Agents can also free up their time from mundane paperwork or finding relevant data that is readily available through these new technologies, and instead focus on what is really important, which is their relationship with their clients,” says Tong.
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